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Mega-Ships: Ready for the New Normal?

By William DiBenedetto, CBN Feature Editor

The questions for port operators and for ship operators go like this: are mega-ships too large for most ports? And will ports ever be large enough in terms of terminal space, equipment and infrastructure to handle the mega-ships?

Even though these issues have been around for some time, there are still no clear-cut answers as mega-ships come on line in large numbers over the next two years.

Shipping lines have taken delivery of 20 mega-ships with a capacity of more than 18,000 TEUs each and another 52 are on order, according to the Organization for Economic Cooperation and Development (OECD). The largest ship delivered so far has a capacity of 19,200 TEUs, but vessels with capacity up to 21,100 TEUs have been ordered and will be in service by 2017.

This generation of huge, highly efficient mega-ships is credited with cutting the cost of shipping due to economies of scale and for lowering greenhouse gas emissions. But the OECD has questioned whether mega-ships are contributing to unsustainable overcapacity and imposing unintended costs on shippers, ports, freight forwarders, logistics firms and insurers.

"The growth of containerized seaborne trade is no longer in line with the growth of the world container fleet," Olaf Merk, administrator of ports and shipping at the OECD's International Transport Forum, said last year in an economic policy article for OECD Insights. "We found a disconnect between what is going on in the boardrooms of shipping lines and the real world."

According to industry analyst Drewry, West Coast ports have much work to do to improve productivity before being in a position to see mega-ships call on "anything other than an ad-hoc basis."

In a recent weekly market analysis, Drewry said: "In truth, the arrival of one 18,000 TEU ship, which may not even be full, won't meaningfully test the West Coast terminals' ability to deal with such ships, but at the very least it raises the question of what the West Coast ports need to do to get there."

The analyst said that despite productivity solutions such as terminal automation and running ports as 24/7 operations, their implementation would demand more flexibility from union dockworkers, which he claimed "seems a long way off."

According to Drewry, letting too many mega-ships call at West Coast ports before they are fully ready could worsen productivity and add days to the load and discharge time at terminals. This would undermine the West Coast ports' competitiveness compared to the U.S. East Coast ports, which are soon likely to enjoy the benefits of the Panama Canal's expansion that is expected to almost triple the maximum size of vessels being able to call there.

The rise of the mega-ships is forcing ports to invest

heavily to attract and handle the new megacarriers. Port channels must be dredged to greater depths and docks must be raised and strengthened to handle the increased forces when a mega-ship is tied up. But the biggest problem comes from the scramble to unload a mega-ship quickly — the average turnaround time for a container ship is now just 1 day, and less in Asia. The arrival of fewer vessels but with larger numbers of containers is creating intense peak time pressure on ports.

Expanding infrastructure and upgrading ports to handle the bigger ships could amount to roughly $400 million in additional annual transportation costs, the OECD said.

The Port of Los Angeles has a $510 million project underway to expand its cargo-handling capacity at the TraPac terminal. Two Long Beach port terminals are in the midst of a $1.3 billion expansion that will create one of the country's most automated docks. A separate $1.3 billion plan in Long Beach will replace the Gerald Desmond Bridge, which is too low for the mega-ships expected to arrive over the next five years.

On the U.S. East Coast, port operators are also modernizing. The Georgia Ports Authority, which owns the Port of Savannah, is spending about $1.5 billion in the next decade to improve crane operations, storage facilities and other infrastructure. The state of Georgia is spending $120 million more to improve roads near the port this year. And the Port Authority of New York and New Jersey has undertaken a $1 billion project to raise the Bayonne Bridge, which connects Staten Island and New Jersey, in order to accommodate the height of the super-sized ships.

Mega-ships also add extra expense when in port: they stay, on average, 20 percent longer in ports than conventional ships, requiring port authorities to spend more time and provide more services to accommodate the longer-staying vessels, Merk said. Insuring and salvaging unprecedented loads of cargo is another strain for operators. And congestion at ports is already rising as trucks and trains scramble to load and offload tens of thousands of containers at a time.

Still, Merk said the mega-ships — which account for about an eighth of the total global shipping fleet — are on track to become the "new normal" for many major ports around the world. "One thing is sure: this will lead us to a decade of port gridlock if nothing is done," he wrote.